In the UK, new car registrations were down 11.5 per cent in January as against the same period last year, though buyer trend is towards fuel efficient vehicles, according to the Society of Motor Manufacturers and Traders (SMMT).

Last month, registration of new cars stood at 128,811 units.

The slump in new car sales followed the SMMT forecasts and has been blamed partly to the VAT rise and bad weather, but largely to the loss of the Scrappage Incentive Scheme, which accounted for 18 per cent of the market in January 2010. Without these sales the market last month was 8 per cent up on January 2010.

The loss of the £2,000 new car discount is expected to dent the market in the first half of 2011 but this is expected to be compensated with the trend of low emissions vehicles and is hoped to support their sales throughout 2011.

According to SMMT chief executive Paul Everitt consumer confidence was low and it was important that the government used the March budget to help relieve some of the financial pressure on motorists by freezing fuel duty, while providing stability and certainty on motoring taxes.

He added that despite the challenging conditions, the demand for low CO2 emitting and highly fuel-efficient cars continued to grow.